Japanese comeback will increase energy demand

Despite a major setback in Japan’s nuclear reactor overnight, it seems that the futures and stock markets of the world are already betting on the great Japanese comeback. Overnight even as reports of a breach of the core at Fukushima Dai-Ichi power plant that may be cracked and leaking radiation, the Japanese stock market put in a brave performance after getting crushed as the Nikkei Index was up by 1.38%. Other markets that sank on fears of demand destruction are now turning around due to the will of the Japanese people. After suffering untold pain and ongoing concerns about food and water contamination the world is starting to bet that Japan will be back perhaps stronger and better than ever. Of course the rebuilding of Japan means a run on many commodity products. We will see increase demand for all energy products as well as many other precious commodities. Oil itself will see more demand for many reason’s including but not limited to its use in construction products.

Oil obviously is also focused on events in the Middle East. Yet oil and other commodities seem to sink on the Portugal downgrade yesterday. Strange, but it seems that instability in the Euro-zone may hurt demand or at the very least that seemed to be the reason for the knee jerk reaction. More downgrades overnight will keep our macro eyes on Europe.

BP loses big and causes a big sell off in the British Pound! Some rich oligarch in Russia really seems to hate BP CEO Bob Dudley. Not only did they get him fired when he headed the BP-TNK deal in Russia they now have threatened to get him arrested. Now they have killed a huge deal to help develop oil supply from the arctic. Reuters News reports that, “BP boss Bob Dudley has come under fire after an Arctic exploration deal with Russia group Rosneft was blocked by the British oil company's partners in joint venture TNK-BP. An arbitration panel ruling prevents BP and state-controlled Rosneft, Russia's largest oil company, jointly exploring for oil in the country's Arctic region and from executing a $16 billion share swap.” This is a big blow to BP who is trying to rebuild its proven reserves. It is also a blow to the global energy market as it is a reminder that when dealing with Russia the risks are high that you will get muscled out if you step on the wrong toes.

Oil traders have a lot to ponder as we head into the weekend and we are not just talking about Libya. In Jordan, one of the United States’ strong allies in the Middle East, has seen violence occur overnight as protestors are calling for the ouster of King Abdullah. According to the Deutsche Press agency, “at least 30 demonstrators were injured when unidentified people hurled stones at hundreds of youths who had spent the night in an Amman square to press their demands for reform, eye witnesses said Friday.”

The Deutsche Press agency also reported that, ‘Mass protests were expected in Syria on Friday as activists called for 'Day of Dignity' rallies in the country, despite promises by President Bashar al-Assad to meet 'the demands of the Syrian people." "Every inch in Syria will rise today for our freedom, for the blood of our brothers, for the dignity of the detained women, for years of pain, fear, repression, corruption and favoritism," one activist wrote on his Facebook page. Many protesters have been using social networking websites such as Facebook, which have been recently unblocked in Syria, to spread news about their action. Friday's planned protests were to take place after al-Assad promised to 'study' ending the country's emergency rule, which has been enforced since 1963. Al-Assad also issued a decree increasing salaries for all employees in the public sector and reducing taxes. The concessions come after a week of violent crackdowns on anti-government protesters that have left dozens killed. Security forces have reportedly opened fire on protesters in the city of Daraa, the focal point of this week's protests.

Phil Flynn is senior energy analyst for PFGBest Research and a Fox Business Network contributor. He can be reached at (800) 935-6487 or at pflynn@pfgbest.com.

About the Author

Senior energy analyst at The PRICE Futures Group and a Fox Business Network contributor. He is one of the world's leading market analysts, providing individual investors, professional traders, and institutions with up-to-the-minute investment and risk management insight into global petroleum, gasoline, and energy markets. His precise and timely forecasts have come to be in great demand by industry and media worldwide and his impressive career goes back almost three decades, gaining attention with his market calls and energetic personality as writer of The Energy Report. You can contact Phil by phone at (888) 264-5665 or by email at pflynn@pricegroup.com. Learn even more on our website at www.pricegroup.com.

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